JM Financials on YES Bank

Yes Bank will be a prime beneficiary of rapidly expanding distribution network (which should lead to continued improvement in CASA mix) and decline in wholesale borrowing costs.

Mumbai, Maharashtra, June 26, 2013 /India PRwire/ -- Yes Bank will be a prime beneficiary of rapidly expanding distribution network (which should lead to continued improvement in CASA mix) and decline in wholesale borrowing costs. We expect the bank to focus on strengthening its retail banking franchise with focus on retail liabilities. Expected c.23% CAGR in loan book over FY13-15E.Also, fee income growth (24% CAGR) is expected to remain strong and in-line with asset growth. We expect earnings CAGR of c.24% over FY13-15E on strong loan growth, margin improvement and healthy asset quality trends. Yes bank also enjoys the best in class asset quality with the lowest gross NPLs, restructured book and credit costs in the banking sector. We are factoring in credit costs of 72bps/70bps in FY14E/FY15E respectively. We expect investment in distribution network to continue in FY14E and expect the bank to add 150-175 branches and 1400-1600 employees in FY14E

We expect Yes Bank to report healthy return ratios with ROA of 1.5% and ROE of 19% by FY15E. We value the bank at 2.5x Mar'15 BV, implying Mar'14 TP of Rs. 700.


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